May 17, 2012
Trademark Trolling by SEO Consultant Provides Cautionary Anti-SOPA Tale (and Other Lessons)--Premier Pool Management v. Lusk
By Eric Goldman
Premier Pool Management Corp. v. Lusk, 2012 WL 1593206 (E.D. Cal. May 4, 2012)
Have I mentioned recently how much I hate SOPA? Today's case is a textbook example of why SOPA--and the things it stood for--were so objectionable to so many people. For SOPA proponents, especially those who falsely (or delusionally) argued that SOPA's tools would only be used by good guys to target bad guys, this case should be mandatory reading.
(This is a default judgment, so the judge relayed the unrebutted facts from the plaintiff's complaint, which I am further relaying here).
Premier Pool Management Corp (PPMC) provides lead generation services for the pool construction industry under the Premier name (the court doesn't use either the terms "lead generation" or "franchising," and I wasn't certain which one best described PPMC). Either way, as a trademark licensor, PPMC provides a variety of services to its licensees, including website management, SEO and other marketing services. PPMC tried to register its trademark but was blocked by a registration held by PPCI, a local Florida pool construction company operating under the Premier mark as well. The trademark registration at issue. In 2011, PPMC and PPCI negotiated a deal allowing PPMC to buy out PPCI's registration for $5k. The relatively low price reflected some doubts about whether PPCI ever made interstate use in commerce of the mark. Then, at the last minute, PPCI bailed out because an undisclosed higher bidder emerged.
Separately, PPMC retained SmartPro, run by the Lusk brothers Dean and Jason, as SEO consultants. I infer PPMC regrets this choice. During SmartPro's research on PPMC's SEO status, Dean discovered PPCI's trademark registration--and became the undisclosed higher bidder! They bought the PPCI registration for $140k with a "business plan" (if you can call it that) of asserting the trademark registration to extract cash from PPMC and 30 other pool construction companies nationwide using the Premier brand. Dean and his "partner" Leonard explained to PPMC how things were going to go:
* PPMC could help get its licensees to pay the Lusks and Leonard exhorbitant royalties to continue using the name "premier"; or
* PPMC could pay an "astronomical sum" to buy the trademark; or
* the Lusks and Leonard would go to the search engines and web hosting companies and shut down PPMC and its licensees.
(Cue the Godfather music and Marlon Brando slurring the words "offer he can't refuse." I half-expected to see references to a severed horse's head.)
PPMC declined this generous offer, and Dean made good on the promise/threat, sending a trademark cutoff notice to PPMC's web host Rackspace, which performed on cue and pulled the plug on PPMC's website. PPMC was able to get up-and-running with another web host, but I assume there was some scrambling and angst (not to mention costs/losses) associated with the transition.
PPMC sued the Lusks, who defaulted. Thus, the judge basically rules for PPMC across-the-board. The most interesting conclusion (again, on default) is that sending a cutoff notice to Rackspace constituted tortious interference with contract, a claim that has been rejected before in other circumstances (see, e.g., the Pandora dispute). The court also cancels the PPCI trademark registration (for lack of interstate commerce use), issues an injunction and awards attorneys' fees and costs.
Where to begin with a case like this? So many things went wrong, it's hard to keep them all straight.
Trademark in Laudatory Terms. At the root of it all is the trademarkability of a laudatory term like "premier." I think we'd be better off if we simply treated [laudatory term] [generic noun] as categorically unprotectable. Otherwise, we get junky trademarks like "Premier Pool Management" with dozens or hundreds of independent users throughout the country. Take a look at the Google search results for "premier pool" and see what a disaster that is. At minimum, I think laudatory trademarks should require secondary meaning, and I wonder how PPCI with its regional and declining customer base showed that. If we took secondary meaning seriously, it's probable that no one could trademark "premier pool management" on a nationwide basis.
Note: if you're looking for a paper topic, a thoughtful analysis of the protection for laudatory trademarks might be fruitful.
SEO Consultants Gone Rogue. This case fuels our fears that SEO consultants are just as likely to be foes as friends. SEO consultants often seem quite sketchy; they keep their cards close to the vest so they don't give any information away for free...plus, customers can't always tell which SEO consultants use black-hat practices. Here, PPMC's story goes far beyond just hooking up with a black-hat SEO consultant. The consultant actively went rogue on its customer--once the SEO consultant got a good look at the customer's business, it could quickly spot the customer's vulnerability and attempt to exploit the vulnerability for its own financial gain. This is the kind of nightmare so many customers fear when hiring SEO consultants!
If you're retaining an SEO consultant, this situation is a great reminder that you need to diligence your SEO consultant THOROUGHLY before retaining them--get referrals, check out any customer reviews, check their own SEOing skills (I couldn't conclusively find the SmartPro website in a quick Google search--not exactly a good sign), and do a background check! You'll be handling over the keys to your business and tons of confidential information to your SEO consultant, so double-confirm they deserve that trust.
Trademark Trolling. As described in the opinion, the Lusks were a classic trademark troll--they bought up weak trademark rights from a third party to build a "licensing"/enforcement business around extracting undeserved value from legitimate existing businesses using the term. The Lusks' trolling business is now kaput because the court canceled the trademark, but before the judicial intervention, the Lusks could cause plenty of mischief. Sadly, I doubt other trademark troll entrepreneurs will find anything in this case to deter them; a trademark's murky boundaries leave plenty of room for trollers to make mischief.
In general, buying up IP assets for the sole "benefit" of asserting them against others is a sketchy business. Trademark law is supposed to suppress such activity by requiring trademark sellers to transfer the goodwill with the trademark; but because this has become a lightly enforced formality, trademark trolling is possible. Even if judges don't enforce the goodwill transfer requirement, they should make all inferences against trademark speculators who buy-and-assert someone else's trademark. That's not what trademark law was designed to do, and it's easy to see how such over-assertions can wreak havoc on an industry.
Pam Chestek has more to say on the trademark problems underlying this case.
Web Host Pliability. The Lusks flashed a trademark at Rackspace, and Rackspace crumbled. It's hard to blame Rackspace given the de facto notice-and-takedown scheme that's emerged in secondary online trademark law (see, e.g., the Akanoc case), but Rackspace's pliability shows the agency problems inherent in a hoster-hostee relationship. The Lusks buy up a questionable trademark and make highly questionable assertions, but it's not worth it to Rackspace to defend its customers' interests. If anything, this situation shows how easy it is to use trademarks to disrupt legitimate customer-vendor relationships.
More importantly, the fact that Rackspace abandoned its customer in the face of a weak purchased trademark exposes several holes in the entire SOPA scheme. SOPA was built on the premise that legitimate IP owners would target illegitimate businesses. But here, an IP owner--using dubious rights it acquired for the sole purpose of legal showdowns--targeted a legitimate business and got the same results. SOPA's enhanced powers to IP owners, plus the cutoff-first/ask questions-second incentives for intermediaries built into SOPA, would only exacerbate that effect. As this case illustrates, we have plenty of problems to fix with the existing law; codifying and extending the IP owners' powers via SOPA would make the situation that much worse.
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